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Jack Sawyer is presently leasing a copier from John Office Equipment Company. The lease requires 11 annual payments of $3,500 at the end of each year and provides the leaser (John) with an 8% return on its investment. You may use the following 8% interest factors: 9 Periods 10 Periods 11 Periods Future Value of 1 1.99900 2.15892 2.33164 Present Value of 1 .50025 .46319 .42888 Future Value of 12.48756 14.48656 16.64549 Ordinary Annuity of 1 Present Value of 6.24689 6.71008 7.13896 Ordinary Annuity of 1 Present Value of 6.74664 7.24689 7.71008 Annuity Due of 1 Instructions

(a) Assuming the computer has an eleven-year life and will have no salvage value at the expiration of the lease, what was the original cost of the copier to John?

(b) What amount would each payment be if the 11 annual payments are to be made at the beginning of each period?

1. The net income for a company was $200,000 last year & is $180,000 this year. Horizontal analysis reflects the percent of increase or decrease was ___%.

2. The net sales for a company were $2,500,000; gross profit was $500,000; and net income was $230,000. The net income to net sales ratio would be ___%.

3. A company has cash $75,000; temp. investments $20,000; net receivables $600,000. The quick or acid-test ratio is

a. .54 to 1

b. .58 to 1

c. 1.74 to 1

d. 1.84 to 1

4. Using Question 3, what is the current ratio?

a. .54 to 1

b. .58 to 1

c. 1.74 to 1

d. 1.86 to 1

5. A company has net sales on account of $1,500,000. net accounts receivable at the beginning of the year are $600,000 & net accounts receivable at the end of the year are $650,000. The accounts receivable turnover is ___.

a. .42

b. .53

c. 1.2

d. 2.4

6. Using Question 5, what is the merchandise inventory turnover for the year?

Heathrow issues $2,000,000 of 6%, 15 year bonds dated January 1, 2004, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,728,224.

Required
1. Prepare the January 1, 2004, journal entry to record the bonds’ issuance.
2. For each semiannual period. Compute (a) the cash payment, (b) the straight-line discount amortization, and (c) the bond interest expense.
3. Determine the total bond interest expense to be recognized over the bonds’ life.
4. Prepare the first two years of an amortization table like Exhibit 14.7 using the straight-line method.
5. Prepare the journal entries to record the first two interest payments.
6. Assume that the bonds are issued at a price of $2,447,990. Repeat parts 1 through 5

1. Coach Bjourn Toulouse led the Big Red Herrings to several disappointing football seasons. Only better recruiting will return the Big Red Herrings to winning form. Because of the current state of the program, Boehring University fans are unlikely to support increases in the $192 season ticket price. Improved recruitment will increase overhead costs to $30,000 per class section from the current $25,000 per class section. The university’s budget plan is to cover recruitment costs by increasing the average class size to 75 students. Labor costs will increase to $6,500 per three-credit course. Material costs are about $25 per student for each three-credit course. Tuition will be $200 per semester credit, which is matched by state support of $100 per semester credit.

a. What is the productivity ratio? Compared to the result obtained in Example Solution, did productivity increase or decrease for the course process?

b. If instructors work an average of 20 hours per week for 16 weeks for each three-credit class of 75 students, what is the labor productivity ratio?

5. The Big Black Bird Company (BBBC) has a large order for special plastic-lined military uniforms to be used in an urgent military operation. Working the normal two shifts of 40 hours, the BBBC production process usually produces 2,500 uniforms per week at a standard cost of $120 each. Seventy employees work the first shift and 30 the second. The contract price is $200 per uniform. Because of the urgent need, BBBC is authorized to use around the-clock production, six days per week. When each of the two shifts works 72 hours per week, production increases to 4,000 uniforms per week but at a cost of $144 each.

a. Did the productivity ratio increase, decrease, or remain the same? If it changed, by what percentage did it change?

b. Did the labor productivity ratio increase, decrease, or remain the same? If it changed, by what percentage did it change?

Castellino Company, operating at full capacity, sold 80000 units at a price of $70.75 per unit during 2008. Its income statement for 2008 is as follows:

Sales 5,660,000

Cost of goods sold 2,100,000

Gross profit 3,560,000

Expenses:

Selling 1,500,000

Admin. 900,000

Total expenses..........2,400,000

Income from operations 1,160,000

The division of costs between fixed and variable is as follows:

Cost of Sales: fixed = 50% variable = 50%

selling expenses: fixed = 30% variable = 70%

Administrative expenses: fixed = 60% variable = 40%

Management is considering a plant expansion program that will permit an increase of $884,375 in yearly sales. The expansion will increase fixed costs by $265,000, but will not affect the relationship between sales and variable costs.

1. Determine for 2008 the total fixed costs and the total variable costs.

(Cost of debt) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with a 14 percent annual coupon rate and a 10-year maturity. The investors require a 9 percent rate of return.

1.Compute the market value of the bonds.

2.What will the net price be if flotation costs are 10.5 percent of the market price?

3.How many bonds will the firm have to issue to receive the needed funds?

4.What is the firm’s after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is 34 percent?

Goal: Create an Excel spreadsheet to allocate costs using the direct method and the stepdown method. Use the results to answer questions about your findings.

Scenario: Antonio Cleaning has asked you to help them determine the best method for allocating costs from their service departments to their producing departments. Additional background information for your spreadsheet appears in Fundamental Assignment Material 12-B2. Exhibit 12-4 on page 532 illustrates the types of calculations that are used for allocating costs using the direct method and the step-down method.

The president of AISExperts Inc., has asked you to develop a flexible financial statement package (call the file yourlastnameyourfirstnameFinState07), using Excel that includes:

• a data entry sheet

• a trial balance,

• a single-step income statement,

• a multi-step income statement,

• a statement of retained earnings,

• a classified balance sheet, and

• a post-close trial balance (a trial balance with only accounts not “closed”)

Each statement must be on one sheet in the file and this file should allow the financial statements to be prepared quickly by entering account balances in the appropriate cells on the first sheet of the file (book) – data entry sheet.

Include percentages in the Income Statement (vertical analysis) i.e. gross profit percentage, % of selling expenses to sales, etc. (common sizing and vertical analysis are basically the same analysis techniques – every number in the multi-step income statement are divided by sales).

Your file must contain documentation with comments (Excel commands: INSERT, COMMENT). The comments should be included where you think explanation is required i.e. earnings per share on the bottom of the income statement should probably be explained or retained earnings might require some additional comments.

Use the financial information above as input for your statements. Only formulas/cell references should appear on all sheets except your data entry sheet (except titles and dates) – no hard coded numbers in the financial statements.

Described below are certain transactions of Beacon Company for 2004: a)On May 10, the company purchased goods from Jay Company for $90,000, terms 2/10, n/30. Purchases and accounts payable are recorded at net amounts. The invoice was paid on May 18. b)On June 1, the company purchased equipment for $120,000 from Nolan Company, paying $40,000 in cash and giving a one-year, 9% note for the balance. c)On September 30, the company discounted at 10% its $240,000, one-year zero-interest-bearing note at First State Bank. Instructions (a)Prepare the journal entries necessary to record the transactions above using appropriate dates. (b)Prepare the adjusting entries necessary at December 31, 2004 in order to properly report interest expense related to the above transactions. Assume straight-line amortization of discounts. (c)Indicate how the above transactions should be reflected in the Current Liabilities section of Beacon Company's December 31, 2004 balance sheet.

• If the discount rate is 0%, what is the project's net present value?

• If the discount rate is 4%, what is the project's net present value?

• If the discount rate is 8%, what is the project's net present value?

• If the discount rate is 10%, what is the project's net present value?

• What is this project's internal rate of return?

Now draw (for yourself) a chart where the discount rate is on the horizontal axis (the "x" axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand 'smooth' curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis?

[Look at the graph you draw and write a short paragraph stating what the graph 'shows"].

b. Consider a project with the expected cash flows:

Year Cash flow

0 - $615,000

1 + 141,000

2 + 300,000

3 + $300,000

• What is this project's internal rate of return?

• If the discount rate is 0%, what is this project's net present value?

• If the discount rate is 4%, what is this project's net present value?

• If the discount rate is 8%, what is this project's net present value?

• If the discount rate is 12%, what is this project's net present value?

Draw a chart where the discount rate is on the horizontal axis (the "x" axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand 'smooth' curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis?

[Observe the graph and write a short paragraph stating what the graph 'shows

c. A project requiring a $3.2 million investment has a profitability index of 0.97
What is its net present value? (Remember: Profitability Index is defined as Present Value of the proceeds divided by the initial investment)